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1. Suppose that money demand depends on disposable income, so that the equation for the money market becomes; M /P = L (r, Y -

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1. Suppose that money demand depends on disposable income, so that the equation for the money market becomes; M /P = L (r, Y - T) Analyse the short-run impact of a tax cut in a small open economy on the exchange rate and income under both floating and fixed exchange rates

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